We used to call it “Isa Season” but this year, stampede would be more appropriate.
April’s tax changes mean there has been a near fourfold increase in the number of investors doing a “Bed and Isa” — selling down holdings in general investment accounts and repurchasing within a stocks and shares Isa wrapper, according to AJ Bell.
Investors have a few days left to sell up and utilise the full force of their capital gains tax allowance before it is reduced on April 6, shielding their assets from CGT and dividend taxes.
What’s more, rising interest rates have reignited the cash Isa market. Many legacy savings accounts are paying the square root of sod all, but the best cash Isa deals offer rates of 4 per cent or more — assuming you can actually get your money into one.
Cash Isas have been insanely popular with higher earners in particular this year as, for the first time in ages, it’s possible that savings interest will be enough for them to have to pay tax on.
However, transferring your cash Isa to a provider offering a better rate of interest is easier said than done.
When Barclays launched its 4 per cent Isa deal at the end of last year, I applied and opened one in seconds online as I already had another Barclays account. However, my husband did not, and his transfer is still “in progress”.
As our local Barclays branch has recently become a PizzaExpress, he had to make an appointment in another part of London and queue up for an hour to show someone his ID and open an account. Transfer forms were then posted, signed and sent back (the postal strike didn’t help) but here we are nearly in April and his transfer is still “pending”.
He has had to make several frustrating phone calls to both old and new Isa providers in an attempt to get things moving, but he’s one of the lucky ones — at least he was able to get an appointment and open an account before Barclays cut its best rate to 3.2 per cent in mid-March!
Barclays admitted that increasing rates had “driven a lot more activity this year”, reassuring customers in transfer limbo that interest will be backdated, and as long as they opened the account before March 14, the 4 per cent rate will still apply.
Santander, which launched a market-leading cash Isa paying 4.25 per cent this week, could learn much from the tangle at Barclays.
But the truth is that all of the banks are very out of practice when it comes to dealing smoothly with Isa transfers.
Last Saturday, in the midst of me making soothing cups of tea for my irate hubby, an email arrived from a reader: “Over four months to make an Isa transfer, and still not done — help!”
Andrew, 71, manages the financial affairs of a beloved aunt in her 90s, now sadly in very poor health. In November, last year, he decided to de-risk and transfer her stocks and shares Isa with Handelsbanken to a cash Isa with Lloyds Bank. He had to visit a branch to do this (ID checks and wet signatures) but then . . . nothing.
“I have spent over 25 hours in total on the phone to Lloyds, visiting my local branch, writing to their CEO and raising a case with the Financial Ombudsman, but still nothing has happened,” he wrote.
And the sum of money missing? Only £150,000.
Well, the good news is that after FT Money intervened on Andrew’s behalf Lloyds has resolved the problem. “We are really sorry . . . and fully recognise the length of time taken is not acceptable,” the bank said, adding it would make a further payment “in recognition of the poor experience” on top of the compensation and lost interest that had already been promised.
“I can’t thank you enough. This has been such a worry with my aunt’s health rapidly deteriorating, but luckily, there were other funds I could draw on,” Andrew said.
Yet again, the key issue was using paper forms rather than digital transfer requests — something the Financial Ombudsman Service says is a widespread issue with cash Isas in particular.
Its latest statistics show there were 264 complaints about cash Isas in the three months to the end of December 2022; a 64 per cent rise on the same period a year previously.
Unsurprisingly, transfer issues were behind most of these complaints. UK Finance, the banking industry trade body, sets a seven-day target for Isa transfers, and HM Revenue & Customs’ own guidance is no more than 14 working days.
Yet it is increasingly apparent that the archaic nature of Isa transfers, compounded by the shrinking number of bank branches and difficulties of meaningfully communicating with bank staff, means it is virtually impossible for many savers to access advertised rates on the top accounts.
My strategy of having a little bit of money with eight different banks has proved wise — if you are classed as an “existing customer” you can more easily get access to preferential rates, as long as you can keep track of your multiple passwords.
Yet with the huge rush to protect cash and savings interest from tax, I fear the quantum of complaints about cash Isa transfers can only increase — definitely an area of the market where the incoming Consumer Duty being imposed on financial services companies is sorely needed.
I’ll leave you with one final idea to squeeze in before April 6.
Rich or poor, every household in Britain has received a rebate of £400 on their energy bills in the current tax year. Those £66 a month credits will now cease — but if your family won’t really notice the financial impact, perhaps you could consider donating your rebate to a fuel poverty charity?
Millions of people are still struggling to afford their energy bills, and this is a particular issue for 4.5mn customers on prepayment meters. Running out of credit will literally leave them sitting in the dark.
This is why we have donated our £400 to the Fuel Bank Foundation and CapUK, which are still experiencing record demand for fuel vouchers from prepayment customers who cannot afford to top up. Both charities work closely with food banks, which are grappling with a drop in donations.
Since I started the #donatetherebate campaign in the FT, these charities tell me they have received many tens of thousands of pounds in donations from our readers — a huge thank you to everyone who has done so.
UK taxpayers can of course boost their donation by adding Gift Aid. If you’re a higher or additional rate taxpayer and donate by April 5, you can claim back some more tax when next January’s bill comes in — and if you’re feeling very generous, you might want to donate that too.
Claer Barrett is the FT’s consumer editor and the author of ‘What They Don’t Teach You About Money’. claer.barrett@ft.com Instagram @Claerb
Source: Economy - ft.com
